Category: NYSE: SAM

Tomorrow’s 144th running of the Kentucky Derby, presented by Woodford Reserve, falls on Cinco de Mayo (as does the 145th edition) and Corona Extra, Angry Orchard and Budweiser have all signed on to sponsor the day’s celebrations. Combined, the 3 brands will replace Stella Artois as the event’s beer sponsor. Corona Extra will serve as the Official Import Beer of North America’s oldest, continuously-held sporting event; hosting a fiesta in the infield for the 160,000+ in attendance and sponsoring Cinco de Mayo parties across the country. Angry Orchard, the Official Hard Cider of the Derby, plans on using the platform to show their newest innovation; Angry Orchard Rosé. Budweiser acquired the rights to serve as the Official Domestic Beer sponsor and for those wishing to remain sober, Coca-Cola has replaced Pepsi as the event’s Official Soft Drink provider.

Howie Long-Short: Louisville based Brown-Forman Corp. (BF.B) took over title sponsorship of the “most exciting 2 minutes in sports” from Yum Brands (YUM) and is using the exposure to market their Woodford Reserve bourbon; the key ingredient in a mint julep (the event’s signature drink). On March 7th, BF.B released its fiscal Q3 ’18 financials; a strong report that reflected net sales growth +9% YoY (to $878 million), with operating income up +11% YoY (to $304 million). The company’s American whiskey brands, Old Forester and Woodford Reserve, each contributed double-digit underlying net sales gains during the quarter (ended on January 31st). BF.B’s Q3 ‘18 results are comparable to net sales (+9% YoY to $2.5 billion) and operating income growth (+15% YoY to $894 million) over the first 9 months of the company’s fiscal ‘18 year. BF.B’s share price is up 42% over the last 12 mo., but has remained relatively flat YTD (-2%).

Constellation Brands (STZ) owns 100+ brands within its portfolio, including Corona Extra. In March, the company reported fiscal FY18 results that included “EPS growth of almost 30%”; the “5th consecutive year (that the company) achieved industry leading EPS growth of more than 20%.” Corona brand sales contributed to the growth, +4% YoY to 138 million cases.

Angry Orchard is a subsidiary of the Boston Beer Company, best known for brewing Sam Adams. Trading under the symbol SAM, the company reported Q1 ’18 earnings on April 25th. Net revenue rose +17.8% (to $28.8 million) as shipment volume increased 15%. CEO Jim Koch noted that the company had seen a “significant improvement in Angry Orchard trends”. SAM hopes that its new Angry Orchard Rosé product can draw clientele from the beer and wine categories.

As for Churchill Downs, Inc. (CHDN), in March the company announced it would be acquiring casinos in Pennsylvania and Mississippi, as it prepares to capitalize on legalized sports betting. Both PA & MS have passed sports betting legislation that would change their laws, should the SCOTUS strike down PAPSA. CHDN also owns brick and mortar casinos in Illinois, Kentucky and Louisiana, 3 other states actively working towards sports betting legalization. Following release of the news, shares climbed to a 52-week high ($268.20). They’ve only continued to rise.

The company reported Q1 ’18 financials on April 28th, including a rise in both net revenue +13% YoY (to $189.3 million) and adjusted EBITDA +36% YOY (to $49.2 million). CEO Bill Carstanjen attributed the growth to strong performance from the company’s casino and TwinSpires businesses. Casino adjusted EBITDA increased $9 million YoY, while TwinSpires’ adjusted EBITDA increased +$3.3 million as the company increased its handle to 20.2%; a significantly higher take than the balance of the thoroughbred industry (14%). CHDN shares are up 64% over the last 12 months (S&P +/-10%) and 17% since April 13th, currently sitting at $274.85 (Thurs. close).

Fan Marino: 19 million people are expected to tune in on television for tomorrow’s race and Louisville icon Rick Pitino is likely to be one of them, despite co-owning a horse (Coach Rocks) running in the Kentucky Oaks. When fired by the University of Louisville in November, Pitino vowed to never return to the state. He’s since softened his stance, but in early April leveled an ultimatum stating he wouldn’t return to Churchill Downs unless both David Grissom (University Chairman) and John Schnatter (Papa John’s, Vice Chairman), “retire from the University Board of Trustees”. Of course, Grissom and Schnatter are the guys who fired Pitino when college basketball’s pay-to-play scandal broke. I admire Pitino’s pettiness, but fail to see how his absence hurts Grissom/Schnatter; it certainly seems as if Pitino is cutting off his nose to spite his face.